Town Square

A Laguna Oaks homeowner has asked the Pleasanton City Council to make employee pension and health care reform a top priority in 2011 or face a citizens' initiative that could force major changes in municipal employee benefit plans.

Posted by I'll sign that petition
a resident of Downtown
on Nov 23, 2010 at 8:12 am

Thank you thank you THANK YOU Bart Hughes! You have laid out for the city council the facts in a way that most of us could only hope to do. If they fail to see the seriousness of these liabilities then hand me a petition, I will sign it and I will circulate it. Overly generous benefits, not one dime of which comes from the employees, MUST go. And they must go with the very next contract negotiation. So city council -- can any of you make the hard choices that need to be made now that your fiscal folly has been made a matter of public record?

Posted by a person in the know
a resident of San Ramon
on Nov 23, 2010 at 8:35 am

Apparently you need to do your homework first because the very next contract negotiation was just completed and all employees (not just PD and Fire) are now contributing to their pension plan. This was just approved by City employees within the last couple weeks.

Bart: The data is available. Please publish the number of Pleasanton employees in retirement and at what pension amounts. You can leave out the names. It would really help the cause if people could see the rich benefits the city employees are getting. There is nothing remotely like this in private sector. Government employees continually claim they could do better financially in the private sector. It's not true I worked there, and of course they never leave. If true, let them go , there is 12.5% unemployed, hire some of them.

Posted by Julia
a resident of Lydiksen Elementary School
on Nov 23, 2010 at 8:48 am

Thank you Bart, for bringing this to our eyes. My Father, just worked on a reform in Menlo PArk, for the exact same reason. They just got this passed. I would be happy to find out more information about the process that it took, if need be.

Our City , prides itself on being fiscally responsible and cutting edge. This needs to be top priority for 2011!

Posted by Concerned Californian
a resident of Valley Trails
on Nov 23, 2010 at 9:30 am

To get what many city employees get - e.g., full pension at age 55; someone in the private sector would need a $2M annuity - even higher at today's low interest rates. Nobody in the private sector gets that unless they are C-level; or manage to save that up from their own private business.

And why do city employees deserve this? Many of them do very little to no real work - pushing paper around and hiring "consultants" to do any real work. And they get paid $150K per year to boot. Taxpayors are sick of this - pensions are an unfunded mandate that will bankrupt all of California so a select elitist class of workers can benefit while everyone else suffers.

Posted by gloria
a resident of Pleasanton Valley
on Nov 23, 2010 at 10:24 am

Thank you Bart. This has been my question since it first went into effect. Why cann't they just do 401K's for employees. I too would be willing to sign a petition. I am sure I would be get many more signatures. Gloria

Posted by Bart Hughes
a resident of Foothill High School
on Nov 23, 2010 at 11:02 am

First of all, I don't live in Laguna Oaks. And why is this relevant to the discussion?

Second, as of this date it is not true that all employees contribute to their pensions. Firemen are the first to do it and only started doing so last month. They are contributing 2% of their salary and the city is picking up the remaining 7.4% of the employee contribution portion and the 25.2% of the employer portion. City  32.6%, employee 2% - some sharing of the burden …

Keep in mind that the entitlement plan was only supposed to cost citizens approximately $26M these past eight years. Instead it has cost us $97M  nearly 4x the original estimate. This has been a known issue all the way back to 2003/4 (well before the financial crisis) and the city has stalled ever since then to avoid meaningful reform. They are still stalling today. Speak with them and they will say it's not that big of a problem and they have it under control. In the meantime, taxpayers shell out $17M/year (compared to $0.6M in 2002). Entitlements now eat up 21% of our general budget compared to less than 1% in 2002.

The facts speak for themselves  the city does not have this under control.

Lastly, I have been in contact with the Menlo Park citizens group and am currently discussing/thinking through an initiative approach of the City Council does not step up and do what is right on behalf of all Pleasanton citizens. They have had eight years to deal with this issue, more than enough time. I lament the "us vs. them" divide that is being created here, but remember it is the irresponsible behavior of the City Council, city management and union leaders that have created this issue.

Posted by a preson in the know
a resident of San Ramon
on Nov 23, 2010 at 11:08 am

Wow there is so much mis-imformation on this post that I think you set a record. The one that really made me laugh is the 150K salary number. Go ahead and look up the latest salaries and count who makes 150K. You will find that no one outside of Department Heads are close to that number.

I am all for having city employees fund some of their retirement and with this new contract they are. Go ahead and check it out if you don't believe me.

To the one that states current employees laugh at new hires over different beneifts. Umm there is no 2 tier system in place so no laughing is taking place.

I could go on but it seems like your minds were made up before this article was even written.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 23, 2010 at 11:34 am

There is absolutely no misinformation in my posts - my information comes directly from the city. I state very clearly where I make assumptions. The vast majority of my facts/figures come directly from the city.

It will be interesting to see the pension contribution rates come January. If employees aren't picking up 100% of their portion at a minimum, the city is once again trying to pull a fast one on the citizens of Pleasanton. Person in the Know - given you have inside information, what will the new contribution rates be?

As of last week, the city is still estimating that 2010/11 entitlement expenditures will be larger than this year. And I could go on and on regarding how city governments (including Pleasanton) are currently down-playing the significant increases that are coming.

Why is it that year after year, the citizen's tab for this poorly thought out retirement plan increases and only now after eight years employees are kicking in?

Posted by Einstein
a resident of Mohr Elementary School
on Nov 23, 2010 at 11:38 am

Count me in also and we need to look at reducing some of the retirement packages of individuals already taking advantage of the system by retiring already in their 50's and early 60's. These last few retirees are just gaming the system by retiring now because they know that the jig is up for the future and they know the first "hog to the trough" is going to win.

Posted by Arnold
a resident of Another Pleasanton neighborhood
on Nov 23, 2010 at 11:51 am

Bart

You seem to have a good grasp of the issues. What isn't mentioned on this board is that the pension system is probably only about 60% funded, and even that is based a discount rate (expected rate of return) of 7.75%. Calpers averaged 3.3% over the past decade. Lowering the discount rate will increase the unfunded liability even further and also increase the city's "employer" contribution rate. That is going to happen in 2011. Increased longevity will also add 1.5-2% to the "employer" cost. Calpers is using a smoothing policy to help reduce the sticker shock of the post market crash rate increase that begins showing up on city bills beginning July 1, 2011 (probably 4-7 percentage points). The increases are in annual steps but by 2015-16, the "employer" cost will be above 50% of payroll. So when you include the "employee" contribution that the city also pays you can expect to be paying 60% of salary toward the safety employees pension.

When the city/taxpayers "pick-up" the employee contribution rate the employee is allowed to count that value toward their highest years earnings, which is the basis of the pension calculation. So, if the employee earned 100k and the city paid the employees share of the 9% contribution, the employee, under calpers rules, would add that 9K to annual salary. Assuming 90%, the pension calculation becomes 109K * 90%, or $98,100 in the first year.

Posted by I'll sign that petition
a resident of Downtown
on Nov 23, 2010 at 11:53 am

If you want to see the lowest level of productivity at the highest cost just take a trip to the city offices. People who sit around all day looking at a computer, watching citizens (aka customers!) stand around and wait, coming up with hoop after hoop after hoop for us to jump through to legally do anything in this town then failing to stop those who do not comply. A city manager who is paid far too much, with three full time assistant managers. Oh yeah, he is the guy who shoved the ice rink on us with the promise that not only would it cost us nothing, the schools would get all of the extra profits. And it ended up costing the city (us, that is) over $50,000. Did that money come from his salary? Yeah, right. I could go on all day. These are the people who make outrageous salaries and make no contributions to what will be their lifetime of retirement benefits. Fair? I think not.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 23, 2010 at 12:16 pm

Let me be clear, I value to services/contributions of city employees. I don't have an opinion one way or the other regarding their productivity level. I'll leave that to others.

I'm focused on Pleasanton's entitlement plan that has grown into something that wasn't intended and is crowding out other city services. We (current and future citizens, future employees, etc.) will all be poorer if we don't get a handle on this and effect change now.

Arnold - you bring up excellent points. I was alluding to the coming increases due to poor city assumptions in my previous posts. Pension cost issues are only going to get worse and crowd out more of the annual budget.

But my understanding is that pension plan is currently 78% funded but it is the retirement medical fund that is only 62% funded - a big issue in and of itself.

Keep in mind that the way the city has maintained a reasonable pension funding level is by starving the rest of the general funds budget. Remember entitlement costs were less than 1% of the general funds budget in 2002, now they represent 21%. Average Pleasanton citizens are poorer for the approach city management has taken to date to address the issue.

Posted by Employer
a resident of Another Pleasanton neighborhood
on Nov 23, 2010 at 1:21 pm

IF our 'representatives' were 'negotiating' on 'our behalf' last month, why didn't we know ? ? There were several PW threads in the last several months. Why wasn't that part of the discussion? PW would just block or stop the discussion. This never transparent council keeps it secret until the night of the slam-dunk rubber stamp vote of approval. I recall the secret "approval' vote was at MIDNIGHT ! ! That year the Mayor 'thanked' our wimpy little female 'negotiator' for having it all go thru so smoothly and friendly and fast...and were going to have the worker actually pay several pennies on the dollar contribution for med CO-PAY.
First,why should it be 'friendly'. We need a fighter that will protect us, the EMPLOYER ! ! WHY wasn't this process TRANSPARENT? I remember McGovern TALKING transparency several times in recent years, but we didn't hear a peep out of her. We have NOBODY defending us. We need to start a Tri-Valley taxpayers group, like they have in walnut creek/cococounty. Ya think union thugs would track us down....and violate the law ? Let's go ! We have no choice, since our 'repressentatives' won't. (represent us, that is).

Posted by Pension vs taxes
a resident of Another Pleasanton neighborhood
on Nov 23, 2010 at 1:35 pm

Q. Why is there a problem now?

A. Poor reality checking.

In days gone by the PERS, and other pensions, had their money invested, and made a very good return- over 8%. Almost a windfall! Rather than let that money build up (and risk having the state "borrow" it), they reduced the contributions from the cities, etc. That was great while it lasted.
But you can't do that anymore, and many of the investments recently lost value.
So the assumptions of high returns is no longer reasonable.
Retirement funds need to take in more now to help make up for the money they should've taken in before as they went.
Is this the Retirees fault? NO.
But having employees pay for the retirement is false economy. Why?
Because the employee would have to earn much more to make up for taxes that would then have to be paid. Not a trivial amount- what bracket are you in?
Could be 20 to 39% for the Feds, plus about 10% for the state.
It is much less expensive to pay the costs for them, rather than give them the money that they could not keep.
And if you compare govt salaries, most are lower than private sector - (Esp.. at the middle mgmt levels) but they used to promise job security, good benefits, and that pension. Only Public Safety get the larger amounts, and they are based on their salary and years of service.
Changing the rules after someone has spent their career is dishonest.

Posted by Arnold
a resident of Another Pleasanton neighborhood
on Nov 23, 2010 at 1:46 pm

Bart

I'm going to stick with my 60% number. The number you are using is probably just last years percentage, and doesn't include the market losses of 2008-09. Calpers uses a one year lag for computing state rates, and a 2 year lag for cities, counties, and special districts. The stock market losses of the great recession aren't included in the number you are using, but are reflected in the 2011-12 numbers (beginning July 1, 2011).

Calpers has just released their Actuarial Valuation reports for 2011-12. I imagine you can go to city hall for a copy. Hopefully they don't make you go the route of submitting a Public Information Act request. If you're interested you can view Fullertons report to get an idea of what Pleasanton is looking at (numbers will be different but the percentages and general information are probably similar). It was posted on "The Friends of Fullerton" website. To view the Calpers report go to the pensiontsunami.com website. From their go to the fourth article from the top and click the link that begins with "Kaboom". On that page you will see the Calpers report just beneath the kid in the toy car. Go to page 15 of the report (21 in your browser) and you will see "funding history".

Fullertons Market Value of Assetts(MVA) was 89.7% on 6/30/08. On 6/30/09, the last reported data because of the two year lag I mentioned, and the information contained in the just released report, is 60.9%. Calpers is now reflecting the market losses of two years ago. On page 1 you will see the Fullerton "employer" contribution rate of 30.2% beginning in July 2011. It is projected to increase to 32.2% the following year, and to 37.7% the year after (2013). That isn't good but it gets even worse when you consider they pay 24.8% today.

I think you will find the report interesting, but most people probably wont.

Posted by Employer
a resident of Another Pleasanton neighborhood
on Nov 23, 2010 at 2:39 pm

Look in the mirror, Pension vs taxes....surely, even you don't believe your words. Informed people and economic experts have been warning us for 8-9 years that this system is NOT sustainable.
So if your pay is SO high that your bracket too high, well...consider that you've been lucky up til now.
How can you possibly say it would be a false econoomy to have employees actually PAY their own 401K ??? hilarious ! All of us in the private sector have always paid into our own 401k since they were created ! ! That's the way it IS in the REAL world....face reality! Your free ride is over.

Posted by Employer
a resident of Another Pleasanton neighborhood
on Nov 23, 2010 at 2:44 pm

I find it is astonishing that nobody has demanded that PUBLIC-UNION member excuse herself when these public-union votes & discussion taked place. That is an outrage. They all sympathize, and contribute to campaigns as a single unit. ....aside from the buying elections of public officials, like themselves.

Posted by Phyllis
a resident of Charter Oaks
on Nov 23, 2010 at 2:48 pm

Pension vs Taxes,

I think that you are going to find that if you do the math 21% of the general budget and growing is an unsustainable level and just by virtue of this number is going to force changes not only to current employee projected pensions but also those which have already retired. No different than a private entity like United Airlines, Northwest etc. which were forced to go into receivership and thus had their pensions reduced for retirees to 30 cents on the dollar and underwritten by Guarity Insurance underwriters. I believe this will be the way going forward for not only Pleasanton but also California as a whole. Not to hurt anyones feelings or to judge one way or the other but we are out of money and government pensioners are really going to need to step up with significant reductions in order to correct this condition otherwise they will lose everything. In addition, making promises that we not possible is dishonest.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 23, 2010 at 4:03 pm

Arnold - I understand - very good insight. I will request and check out the Actuarial Valuation report.

FYI, city management will be publicizing new contract terms for the general workgroup in January and allow time for public comments. Please be on the look out for this and be prepared to speak up. Otherwise I suspect a slightly improved version of status quo will be approved.

Posted by Castlewood Member
a resident of Castlewood
on Nov 23, 2010 at 4:14 pm

Glad to see it on a larger scale. We tried to negotiate with the union, but they refused to give up 100% paid healthcare benefits. So they were replaced as workers. Why be more sympathetic to them, than the city workers. The problem is faced by communities and employers alike. Give aways are going away.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 23, 2010 at 4:42 pm

Pension vs. Taxes - here are some responses to your comments:

- We have a problem because the 2002 City Council voted in a plan with assumptions that weren't reasonable. As soon as the next year when reality did not match assumptions, no one tried to readjust the plan. If this were a business, it would have been fixed long ago.

- Remember that SB400 (state level plan that much of subsequent plan redesigns were based on) passed in 1999 and Pleasanton's soon after. So no, most employees have not worked the majority of their careers with this new program. So your dishonest comment is not relevant. If anything, the dishonesty came from passing a plan and misrepresenting the cost to the public.

- Pleasanton has made pension payments every single year since the new plan was voted in. In fact, their payments went up substantially as I previously pointed out. So no, this is not a situation where it is now "time to pay the piper". The dramatic increase in costs just demonstrates how unviable the original plan was.

- What most people don't realize is that given the actuarial assumptions from calpers, every $50k of final year salary for a 55 year old represents a net present value of $1.35 MILLION. Absolutely nowhere in private industry will you find such a program for the simple reason that it is not affordable. You will bankrupt society  just like is starting to happen at the Federal, State, County and City levels.

- During my professional career, I ran a significant organization and am very familiar with compensation for various administrative positions. So from a basis of first-hand knowledge, I can confidently say that the total compensation levels (salaries plus benefits) are higher than industry for many/most like positions. Look at the simple fact that city employees have receive annual raises for the entire duration of this economic crisis. City employees are not underpaid by any stretch of the imagination.

- The hypocrisy in your logic to pay public employees in pension rather than salary due to high tax rates is interesting. I'll just let that stand on its own as most will see through the convoluted logic.

We have this mess because the 2002 City Council voted in an irresponsible entitlement plan and subsequent to that neither the City Council nor city management found the courage to do what was right for the average citizen of Pleasanton. And if more citizens don't speak up, things will likely get worse.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 24, 2010 at 7:20 am

The people who work for the City of Pleasanton are ordinary people like you and me. Public jobs tend to pay less than private corporate jobs, and many people accept that lower pay in exchange for the opportunity to retire younger and/or with better benefits.

What would you do if your pay and/or benefits were cut? Go look for a new job? That's what I would do, and that's what these workers will do. We'll lose the terrific employees we have now, and get stuck with the lower-quality people who will apply for these jobs that will now have poorer benefits and/or pay relative to other cities or corporate jobs.

You get what you pay for. That's the free market economy/labor market at work.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 24, 2010 at 8:12 am

"b", if you check into the facts you'll find that many of your underlying assumptions just aren't true in this case. Also, please keep in mind that many employees started work with very different and lower entitlement benefits. Entitlement benefits are beginning to come down across the board in other areas because it is a simple mathematical fact that current schemes aren't sustainable.

Please remember that one of my intents with all this is to get those employees who will benefit the most from the current program to contribute more. I'm doing this partly to protect the future for future new Pleasanton employees. If the city runs out of money paying the retirement benefits for past/current employees, there will be less for future employees and we all will be poorer for that.

So if you truly care about the quality of future city employees, you will fight along side me.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 24, 2010 at 7:55 pm

Bart, my facts come from conversations I've had with many, many public workers over the years. You can create whatever rules you want. But in the end, it is a free market, and the best workers will follow the best jobs. That's what I've done in my career. Haven't you? Why wouldn't any other rational person?

Posted by Arnold
a resident of Another Pleasanton neighborhood
on Nov 24, 2010 at 9:26 pm

b

How does a monopoly service provider (city services/employees) equate to a free market? Who are the city employees competing with? And how is it that union contract language guarantees raises and includes provisions to increase those raises if a salary survey shows some positions below the mean - with no provisions to decrease the wages that are above the mean? How is that fair to the consumers that are paying for these services?

Posted by Sick and Tired
a resident of Dublin
on Nov 25, 2010 at 12:30 am

Every grassroots movement needs a figure head. I say, don't stop at revising Pleasanton's City Employee's total compensation package, it should be a mandate for all cities in California. For instance, Dublin's city manager salary is excessive and that doesn't take into account any bonuses she or other employees enjoy, while the private sector has reduced or halted raises for their employees for years yet corporations are making RECORD profits. Cities often model their compensation packages with the private sector, however when private sectors delay or deny bonuses, salaries or other compensation the public sector has selective amnesia when it comes to fiscal and sustaining obligations. Optimizing and utilizing computer applications and programs, total quality control processes would help to reduce overlaps on administrative work thereby reducing bloated overhead and associated costs. Why should public employees be allowed to Pig Out at the Public Trough, without any oversight? Let's get a movement going with reduction in public employee salaries at the local, regional and state levels. Something has got to give. Most tax payers are sick and tired of paying exaggerated salaries for under supervised arrogant city employees who don't answer their own phones, nor return calls in a timely fashion and bilking the city coffers because no one in authority is listening to the general public, they are busy building their hierarchy justifying their higher level salary. While I don't agree with the methods and anger management problem the Tea Party movement displays, I do agree with their mission of reducing bloated government bureaucracy and their costs. Too often the problem with the Tea Party is they do the bidding work for Corporation's wishing to reduce regulations. However, those same corporations have no problem when regulations become a mandate on the general public where purchases are required to comply with a law, regulation or mandate benefiting themselves! The public needs a figure head to stop the bloat in all levels of government -- I don't see a leader stepping up to the plate.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 25, 2010 at 8:38 pm

Arnold, et al

It is a free market because these employees are free to go work for anyone else they choose. Referring to them as "monopoly" with respect to employment would imply that they are the only employer in the area, which is most certainly not true. Why would people come work for the City of Pleasanton if they can get a job with better pay and benefits with other public or private employers?

I assume you've looked for a job at least once in your life, if not a few times. Were pay and benefits not a factor in your decision about who to work for? Why wouldn't it be a factor for the employees of the City of Pleasanton?

In the Bay Area, $125k-150k is not an unusual level of pay for a mid- to senior-level professional or manager. Many private employers also offer very generous benefits, stock options, etc. How are we going to attract high-quality people to run our city if we don't offer salaries and benefits that are competitive with other employers in the area?

Posted by Yet Another Teacher
a resident of Hart Middle School
on Nov 25, 2010 at 10:49 pm

b:

Good point about comparing private sector with the public sector. I work for a high-performing school in a high-performing school district. If I were the employee of a private business, I'd have stock sharing options, performance bonuses in good years, etc.

But I don't get any of that. The tradeoff is that I get to do socially meaningful work with a decent pension plan and a reasonable amount of job security. PUSD teachers have contributed to their own pensions since Day One, and of course we negotiated what I consider a bad deal, which is paying for our own medical benefits (our costs are skyrocketing at the same time our workload has increased significantly because of layoffs and our pay has been cut because of furlough days).

If you take away the pensions and relative job security in public sector jobs, you won't be able to attract people into those positions.

I wonder why Pleasantonians who blog on the P-Weekly can't seem to work up any outrage over the Wall Street banks and brokerage firms who not only dynamited our economy, but who continue their bad old ways? I guess teachers and city workers are easy targets, and make convenient scapegoats for a problem we didn't create.

Mr. Hughes: Good job on convincing the six or seven people who always blog on the P-Weekly. All you had to do was say something bad about the government, anything at all, and they were automatically on your side.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 26, 2010 at 7:53 am

I urge everyone who is concerned about the issue I raise to look at the facts. Then form your opinion based on knowledge.

Fact, the generous entitlements that were voted in during the 1999-2002 time frame (based on SB400) were not supposed to cost taxpayers extra (or in the case of Pleasanton much extra) due to the expected increases in the stock market. Pleasanton published in 2002 what the cost of the enhanced program was supposed to be.

Fact, reality turned out much different and the entitlement programs are putting tremendous financial pressure on all levels of government. From 2002 to 2010, Pleasanton's program has cost nearly 4x the original estimate. Clearly, the original plan was a mistake.

Fact, Pleasanton taxpayers have picked up 100% of the cost overruns of this mistake. Employees have picked up 0% to date (except for the small portion that the fire department started contributing last month).

Fact, the City Council and City management has had multiple opportunities these past eight years to fix the problem is a way that is fair and equitable to both employees and taxpayers. Their actions/lack of action has ensured that taxpayers continue to pay for the mistake. Entitlement costs have increased from 1% of the General Funds budget in 2002 to 21% of the General Funds budget today.

Fact, I don't represent an isolated concern nor minority group. As evidence, there were 10 entitlement reform bills on bay area ballots this past election. Nine of those won  many by very large margins. There is a growing awareness and concern of the significant public employee entitlements issue. Check out www.pensiontsunami.com.

Fact, you can't look at public employee salaries alone to conduct an apples-to-apples comparison to private industry. The pension component is a huge factor. Here is an example. Let's assume someone finishes their public service career at 55 with a final salary of $150K and they worked 30 years. Essentially they were earning an extra $122K/year during that time (imputed annual pension amount for the next 27 years). You will not find the equivalent of this in private sector, and I haven't even discussed the medical benefits. There seems to be a misconception with public employees that most/all private employees receive large bonuses, stock options and 401K matches. This is simply not the case. And for those that do, much of this is eliminated during economically challenging times. Public employees do not face this risk/reward paradigm.

Fact, Pleasanton attracted quality employees prior to the balloon in entitlements benefits. With the downsizing of public employee benefits that is occurring across the country and across CA, I strongly suspect Pleasanton will be a compelling employer post the right-sizing of benefits.

I am not out to get anyone. Again, I value the services that city employees provide to our community. However, I am not supportive of a program that will continue to starve the city. We need to find a new approach based on sound financial assumptions that is fair to all stakeholders  current/future residents and current/future employees.

I welcome the debate from others as I always try to learn something from the other side. But please keep in mind that framing the discussion with facts helps everyone and attacking the messenger helps no one.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 26, 2010 at 8:07 am

One more thought that will make this issue more real for everyone. The current program essentially makes millionaires out of any employee who retires at the age of 55 with a pension over $37K/year (the net present value/NPV of pension payments over the CALPERs actuarial lifespan of that person).

I agree that public employees deserve a retirement program, but not one that is significantly richer than the pre-1999 programs and one that continues to bleed the city.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 26, 2010 at 9:15 am

There seem to be conspiracies lurking everywhere these days.

The reality of the situation is that the City of Pleasanton is merely trying to address the realities of the labor market in one of the most expensive regions of the country. Nothing more, nothing less.

As an employee of who works for a private-sector corporation, I would not accept a job that did not have the level of salary, benefits, 401k match, stock options, etc. you describe. I would hope that the City of Pleasanton would offer similiarly generous benefits in order to attract similiarly qualified people to run our city.

Bart, to force the City to implement these kinds of restrictions, without also imposing them on other regional public and private employers, would simply be a disservice to the residents of our city who depend on these city services.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 26, 2010 at 9:51 am

"b" there is absolutely nothing "conspiracy" regarding what I have presented. They are the facts, pure and simple.

It seems you many not be aware of what average compensation is for the Bay Area and in particular the professional class you compare city employees with.

I recomend you investigate what is happening with other cities regarding public employee compensation/benefits. Maybe start with the initiative Menlo Park recently passed. And there are many other examples.

Let me ask you, do you think it is OK that:
- Entitlements cost the city $600K in 2002 and now $17.5M this year?
- Entitlements have cost the city 4X than was planned?
- Entitlements now eat up 21% of the General Fund?

I would like to get your honest answer and justification if you think that this is OK. How would you justify this to citizens of this fine city that are seeing a reduction in services/increase in fees because of this?

Remeber the current system allows employees to retire at relatively young ages with multi-million dollar (NPV) retirement packages.

Posted by I'll sign that petition
a resident of Downtown
on Nov 26, 2010 at 10:34 am

For those who say that we cannot attract quality employees -- get a grip! Consider the unemployment numbers right now and tell me that NO ONE would work for this city for a reasonable salary and pension. Would they work here and leave when the labor market is better? Maybe, and that would be a good thing. Their pension obligation would go away with their departure from the city.
For "b" -- "I would not accept a job that did not have the level of salary, benefits, 401k match, stock options, etc. you describe. " Yeah, sure. Your ego speaks loudly now but I'll bet if your high pay and benefits evaporated you would not be so proud as to demand what you claim that you need in order to accept work.
I say cut the pay and all of the benefits and watch for the exodus from city employment. And watch and wait and watch and wait some more. Not gonna happen in this economy. Now is the time to make those cuts, we have the upper hand and the council better use it.

Posted by Yet Another Teacher
a resident of Hart Middle School
on Nov 26, 2010 at 11:05 am

Yup, that's what I thought: no anger for the Wall Street criminals who are in the continuing process of destroying the American economy, not a word of protest against the US companies who sit on two trillion of cheap cash and refuse to hire anyone because their profits are higher than ever with a reduced work force, no anger at the politicians who enabled all of this...

No, instead the anger is turned on the modest but decent pensions (and that's what they are) of UNIONIZED public sector employees.

Mr. Hughes claims to represent a large segment of the community. Um, so where are they? I've seen the exact same half-dozen right-wing nutters supporting you on this message thread who support everything that is anti-union, anti-government, anti-everything, really.

And the Pleasanton Weekly continues to disgrace itself by presenting only one side of an issue, essentially lending a megaphone to the tea baggers or whatever it is the angry white right-wingers are calling themselves this week.

Once again, I ask:

I am a public sector employee. Do I get paid overtime for hours worked beyond 40 hours a week?

No, I don't--and I usually work 50-55 hours a week, including my teaching duties as well as preparing lessons and grading papers.

I am a public sector employee. Do I get a performance bonus when the school district and my school perform well on state tests (the API for example)?

No, I don't, and I never will.

Mr. Hughes says he "values" the contributions of city employees. Yeah, right, and I have a bridge in Brooklyn to sell you. Go ahead, cut their pay and benefits and watch the exodus of city workers when the economy improves--if it ever does. Doesn't seem it will, since nobody is focusing on the Wall Streeters who continue to loot this country.

Predictable and boring responses from right-wing ideologues on the P-Weekly. Wash, rinse, repeat.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 26, 2010 at 11:10 am

Bart, I am well aware of what compensation in the Bay Area is.

I know what I earn, I know what I pay my employees, I know what other companies in the Bay Area have offered me and family/friends. Private industry salaries/benefits are easily searchable on glassdoor.com, and public salaries/benefits are regularly reported in the newspaper and online.

Based on all of the above, I see no evidence that employees of the City of Pleasanton are overpaid relative to their other employment options, nor do I see any evidence that the City of Pleasanton has done anything wrong in their attempts to attract high-quality employees.

I also see plenty of evidence that the local job market is generally more competitive than you seem to think. There is a lot of demand for professional/skilled workers in a lot of sectors right now--as evidenced by the difficulty I'm having filling some positions, and the numerous people I know who are being actively recruited by multiple employers now.

I don't dispute the numbers you've reported. I understand that they may sound large to you. But that's what it costs to employee people and run a professional organization in this expensive region. Public employers tend to offer more generous retirement benefits, while private employers tend to offer more generous bonuses, stock options, etc. But the overall costs of employing individual people tends to run about the same.

Your initiative is a great disservice to the people of Pleasanton who depend on City services and want them delivered by well-qualified employees.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 26, 2010 at 12:41 pm

Yet Another Teacher - It is unfortunate that you resort to dogma-laced name calling and accusations.

I'll continue to focus on solving the issues that face our community. Yes, there are broader issues facing our country. As it is hard to influence the dysfunction that is occuring at the national and State levels, I'll continue to focus on Pleasanton.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 26, 2010 at 12:47 pm

"b" - Are you going to address the fundamental question I posed on whether it is OK to continue to allow an unintended, cost out-of-control public entitlement system to crowd out the rest of Pleasanton's budget?

Also, I would welcome industry examples from you of companies that guarantee multi-million dollar retirement packages for most if not all benefited employees.

Posted by Jackie
a resident of Another Pleasanton neighborhood
on Nov 26, 2010 at 1:01 pm

At the last Council meeting Councilman Thorne asked the Council to support holding a special public Workshop to discuss employee compensation including pensions. The Council agreed. I believe that this will be a much better way to discuss this issue with the public. An anonymous blog is probably the worst.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 26, 2010 at 1:46 pm

Bart,

I did address your question, by saying that I don't see the crisis or the conspiracy. I just fundamentally disagree with your assertion that anything is out-of-control.

I think our city leaders have done a reasonable job of managing our city's finances in a difficult fiscal environment, while creating market-responsive compensation packages that allow them to recruit great people to run our city.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 26, 2010 at 1:51 pm

Thanks for the update, Jackie. It sounds like our city leaders are on top of the issue. I agree, any issues and concerns should be addressed through our elected Council, not anonymous blogs or more misleading, melodramatic referendum initatives. I've communicated with various Councilmembers in the past, and they've always been open-minded and responsive to my feedback.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 26, 2010 at 2:02 pm

b - Ok, since you don't be believe nearly 4x the cost estimate (and growing) is out of control, what is your threshold? 5x, 6x ...10x?

Also if 21% of the General Fund is not excessive, what is? 25%, 30% ...50%?

Are you sure you are being unbiased about this, or you don't have a personal/family angle to this?

Remember, Pleasanton was able to attract plenty of qualified candidates prior to the ballooning of the entitlements program. And this was during the dot-com boom which will likely be the most competitive employment environment during our lifetimes.

Posted by b
a resident of Another Pleasanton neighborhood
on Nov 26, 2010 at 3:45 pm

Bart,

It sounds like the Council is dealing with it. If you disagree, go speak at a Concil meeting. That's what they're there for.

I have no personal angle. Every two years, I vote for people I think will make reasonable judgments about what is the best way to run the city. On some occasions where I've disagreed with them, I've contacted them. They've always responded to at least acknowledge my opinion, if not engage in healthy dialogue.

Please don't waste more taxpayer money on these ridiculous initiatives. If you don't like the way the Council is doing their job, vote them out in two years.

Posted by Stacey
a resident of Amberwood/Wood Meadows
on Nov 26, 2010 at 3:57 pmStacey is a registered user.

b,

Bart went to speak at the Council meeting. The Council is dealing with it because citizens like Bart are doing their research, speaking at meetings about it, and bringing the general public's attention to it through venues like here.

I think what we'll be seeing in the coming years is a transformation of compensation in the public sector. The public sector still relies upon compensation models that the private sector abandoned for the very same reasons facing the public sector now.

Many of the salaries posted in the paper for public safety are misleading. Cities save money by not hiring to fill open vacancies. Those spots must be filled and often times force the employee to work without choice. Yes you are paid, and it is considered "overtime" but keep that in mind when evaluating these salaries in the paper. It is cheaper for cities to leave a certain number of spots vacant and filled with overtime instead of hiring a new employee with training, benefits, etc. So when you see the 100K + salaries know that they are spending a tremendous amount of time at work. Fireman already work 56 hour work weeks as it is.

The pensions public safety receives are well deserved. The diseases, and chemicals they are exposed to on a daily basis is why they need great healthcare benefits. The injuries occur often. They tend to increase when their are vacancies in the rank created by the city. This is due to people working extraordinary hours and overworking their bodies.

Most people couldn't work past 50 as a Fireman. The job is very physically demanding and with the accumulated injuries during the course of your career you are lucky to make it to the end without any major life altering injuries.

I challenge all of you to check the statistics and you will see that our public servants are compensated no more than a majority in this state.

Also keep in mind that when you see salaries in the paper in Pleasanton that you will see a lot more Fireman than anything else. That is because the Fire Department is for the cities of Livermore and Pleasanton.

Look into Cancer rates for Fireman for one example. You tell me if they are overpaid with pensions they don't deserve.

Posted by Arnold
a resident of Another Pleasanton neighborhood
on Nov 27, 2010 at 12:01 am

b

The council has been dealing with it - rising employee pensions, salaries, and healthcare costs. I'm siding with Bart on this issue. Many local cities are cutting staffing because they've allowed compensation to accelerate while revenue and reserves were decreasing. If your concern is really to see continued good service from the city you should consider going before council to ask that they take this issue seriously. Otherwise the cost of good service will be increased taxes and fees. And if you are a current or retired employee you should be concerned about the sustainability of your pension and retiree healthcare. Valejo just cut their retiree healthcare from the Kaiser North rate of $1350 per month for retirees (employee 2+) to 300 per month.

Regarding my previous post to you, and your response, you are correct that there's a free market for employees and they should be paid fairly. No argument from me on that point. However, there isn't a free market for taxpayers to choose who provides their city services, and at what cost. The services are provided by the city and the labor costs/wages have continued to increase while revenue has decreased. The pension costs are only 7 months away from a very rapid escalation, healthcare costs are increasing by an average of over 7% per year, and salaries have increased during the great recession. That is what I call a triple whammy!

So, what do you have against looking at these issues, comparing public/private sector compensation including pension costs, and letting the chips fall where they may? It's not about an attack on employees or the city's management; it's about the taxpayer's right to question how the taxpayer dollars are being spent. It's the city government's responsibility and duty to be a good custodian of the taxpayer's money and I don't see any problem with asking them to justify their actions. I actually looked a t Dublin's financials and there was something that stood out, something I don't remember seeing before. On their city Org chart they listed "Residents" at the top of their hierarchy: Residents, City Council, and City Manager. I thought that was both cool and appropriate.

Taxpayers, and the city for that matter, should encourage a healthy dose of scrutiny. Cities up and down the state are getting the same questions. And yes, some cities haven't been listening and taxpayers have had to rely on the initiative process. That doesn't cost the city a single penny unless the authors gather the appropriate number of signatures. If that happens then will you consider the other side of the coin? I think Pleasanton councils, management, and employees have been doing a good job. But I also think they have dropped the ball on the pension issue, and other employee costs.

Just because things that made sense in 2002 doesn't mean they make sense going forward. Given the state of the economy it might be the appropriate time to reevaluate past decisions.

Posted by Employer
a resident of Another Pleasanton neighborhood
on Nov 27, 2010 at 9:31 am

Replies to several:
To always foot-in-mouth 'Yet Another Teacher". Nobody in my varied family has ever received company stock. First, many that you call private, are just that, PRIVATELY held companies, not on the stock market !
Sick and tired, in fact many in TP are anti-corporations.. and only support little companies. It is such a mixture of partially informed, that it is hard to refer to any group policies, other thank subsidies and regulations.
b- I'm not aware of any positions from state down to city public employees that require unusual mental dexterity...it's NOT rocket science ! !
Bart, Keep you informed. The questions you pose, and steps you propose, and solutions you see, are right on !

Posted by GX
a resident of Another Pleasanton neighborhood
on Nov 27, 2010 at 10:45 am

Fire departments and police departments must be part of the pension reform discussion. For many cities, public safety compensation make up the majority of budgets and are helping to create the funding crisis.

Also, there is much mis-information being spread to protect the status quo of public safety entitlements. If you investigate figures and the Bureau of Labor Statistics and CALPERs, you will find that on average police and fire jobs aren't the most dangerous jobs (especially here in Pleasanton) and policemen and firemen live as long or longer than the general public.

The MAJORITY of these make well over $130K in compensation!!!!!
They employ 126 people, and only 7 (count them, 7!!) make less than $100K. Like $93K, $90K, $75K, $69K, $68K, $48K, and a temporary retiree that makes $27K. The retiree is probably getting a pension, and gets $27K for temp work!! Double dipping??? Nice job, IF you can get it.

The President of the United States makes $400K in salary, and we have people in the fire department making close to $200K.

Posted by Not So Sure
a resident of Another Pleasanton neighborhood
on Nov 28, 2010 at 11:55 am

There are a lot of towns around the country with thriving volunteer fire departments that have waiting lists to get on them. It seems it is a California culture thing to have highly paid professional fire fighters in every neighborhood- and have them unoccupied a lot of the time.

I think the State needs to examine what our fire-fighting needs are. Obviously, we have a greater need for wildland fire fighting but residential and most business needs may be able to be met in a more economical way.

But then...there's a union to deal with. I just wonder what happens when the State runs out of money. It certainly looks like it will - and pretty soon too.

Not So Sure- It is hard not to laugh to believe that you think a Volunteer Fire Department would work around these parts. Volunteer departments work in small rural areas that typically are not very busy. Additionally, I challenge you to locate any volunteer department that covers an area as expensive to live in as this Bay Area is. Do you really believe that people would "Volunteer" their time to work when many can barely make ends meet working 40 hour a week jobs? Pay attention and fully think things through before making such ignorant comments. You are the person who would be on this forum the very next day when the fire department wasn't their fast enough to save your loved one. Having great service isn't free.

Another Software Engineer- 130K!!!!! in compensation! Wow!!!! Instead of jumping to conclusions did you ever bother to ask any questions? Questions such as is this their base pay or was this including overtime? I would bet my house it included overtime. No Fireman makes a base pay of 130k. Your next question should have been why is their that much overtime to work? Could it be that the City of Pleasanton has chosen not to fill these vacancies? Instead, rather having current Fireman fill those vacancies? Could this method save the city money rather than hiring more Fireman with benefit, and training costs? I could give you all the answers. But would rather you spend some time to research them for yourself. Keep in mind those are two cities Fire Department in one. Do you think the City of Pleasanton is paying all of those salaries????

Posted by Really?
a resident of Another Pleasanton neighborhood
on Nov 28, 2010 at 9:18 pm

The ignorance lies in that some still believe that all the fire department does is fight fires. Volunteer, are you kidding? Do you volunteer for your job, to support your family? What a testament to the times that people turn on the service oriented professions with blame and faux outrage yet still demand the same if not better quality of service. Bart for mayor, give me a break....then who would criticize him and actively work to take away his retirement? Im sure Bart would have nothing of it.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 29, 2010 at 7:50 am

I will continue to repeat that I value the services city employees provide to this community. My issue is not with the employees but an ill-planned entitlement program that is putting financial stress on the city.

City employees deserve to be fairly compensated for their contributions, but a retirement program that enables people to retire as young as 55 with million dollar plus retirements is over the top in my opinion and is not sustainable.

I also have a major issue with city employees not contributing to their retirement funds during a time when the cost of that benefit was sky rocketing. Even now only token contribution amounts are being discussed and won't even cover all the portion of the employees' portion. Contrast this with other cities where employees are not picking up 100% of their portion plus some of the cities' portions.

You don't need to worry about my retirement as it is coming from my own savings. I've learned to spend less than I earn.

Posted by Not So Sure
a resident of Another Pleasanton neighborhood
on Nov 29, 2010 at 8:59 am

I appreciate Bart Hughes efforts to solve our community's long term fiscal problems.

And to Record: You don't need to call me names. I'm not ignorant. I grew up in the suburbs outside two metropolitan cities on the East Coast which were similar in wealth to Pleasanton and also similar in demographics, population density and industry. They both had volunteer fire departments and my friends' fathers belonged to them. It was a neighborhood/cultural thing and a lot of men (all men at that time) really wanted to belong and it was hard to get into. They trained together, socialized together and I don't remember anyones's house ever burning down. They also worked very hard at this endeavor - it was a matter of pride. The paramedic services were a separate entity.

I do not really believe that California would ever become a volunteer fire service - not for a minute. But I don't think it would hurt to ask questions of other metropolitan suburbs around the country about how they manage fire protection and what their costs are. And you don't need to call other people posting here names. It's a discussion that is needed to address fiscal costs of city and state services that are in trouble because of their costs.

Sadly, you are going to need a lot of luck working with this council about public sector contract reform. I saw the Fire dept. folks putting out signs for their candidates this last election, Hosterman, thorne and cook Kallio. Why were they supported? Because some of the other folks went public about public sector salaries were totally unsustainable and that they needed to start contributing their share. As I recall, Cindy McGovern said the unfunded liablities were $138K if medical and retirement entitlements were added together.

The Times newspaper backed Cindy, Thorne and Brown for reform, but the voters only put Thorne in office. With McGovern in office now, and Thorne re-elected, you just need 1 more vote to move this forward.

Posted by Another Software Engineer
a resident of Amador Valley High School
on Nov 29, 2010 at 1:29 pm

Record- Yes, I knew that $130K is not the base salary, it is with overtime. I have no problem with overtime, but the problem is that then their retirement package is based on the NET amount of compensation, not their base salary.

So, they often retire with a pension that is higher than what they were making when they were active on the force. And we the taxpayers have to foot the bill.

Posted by david
a resident of Amador Valley High School
on Nov 29, 2010 at 6:11 pm

A good website is www.insidebayarea.com/public-employee-salaries. It appears the municipal salaries are very high for mid-managers and above. Take into consideration beyond the salary, overtime, little the department is already over-staffed, little if any paid by public employees toward health insurance coverage, and 0% is paid by employees into their pension fund whereas most private sector jobs pay out-of-pocket for premiums and of course social security. You can not compare public to private sector equity when public sector jobs are union protected and involves little or no risk like businesses take daily. It is the County and State workers on the front line who take care of social services programs that are underpaid, not the municipal workers who are a bulk of PERS retirement shortfall.

Posted by Concerned
a resident of Another Pleasanton neighborhood
on Nov 30, 2010 at 1:37 pm

Bart:

I want to thank you from the bottom of my heart for the yeoman service you are performing. I have been trying for several years to get comparable compensation levels for private and public sector jobs (Including retirement and medical benefits). They have stonewalled this. Jerry Thorne has been trying to get this for ever. Kay Ayala has been trying for the past decade. We have all become serfs working for the elite public sector workers. Let others worry about the Federal and State problems. Let us try to fix the city situation. They always do this in closed session in the dark hours. The city attorney got a boost in his final year compensation to boost his pension after messing up numerous legal issues that have cost the city millions. We need to all go to the next city council meeting on Dec.7th before they try this 2% for the next contract. We need to make retroactive changes as well. The council is powerless or do not have the backbone to fight the unions. The citizens have to do it. Make it a Pleasanton Tea Party.

Fireman barely make it thirty years as it is with injuries, disease, etc. Believe it or not you would cost the cities more money if you attempted to change retirement to 60 for example. They would be out on worker's compensation so frequently, shifts would be getting filled with overtime, and medical retirements would increase. All of which costs the city a lot more money. I thought it was convenient that know one addressed my post regarding cancer rates of Fireman. Why do you think the fire department values their medical benefits so much. They are exposed to hazardous chemicals, sickness, and disease more on one day of calls then you will your entire career at your desk. It is amazing that you would compare private sector medical benefits of someone sitting at a desk against Fireman.

Suzy Q- You act like you cracked a case seeing Fireman seeing them supporting their candidates by posting signs. Isn't that what you do in an election? It is a political process. Why would they support candidates that do not support them? It is only common sense. Big deal they were supporting Hosterman, Thorne, and Cook Kallio. Everyone knows that. If you don't agree get out their and do something during the next election. Go volunteer to post signs for your candidate of choice. But don't come sit in front of your computer on the Pleasanton Weekly giving Fireman a hard time when they have boots on the ground working.

TO ALL ON THIS FORUM: You understand that any private sector job can become unionized. You too could begin to negotiate better working conditions, and compensation with your employers as well.

Posted by Bart Hughes
a resident of Foothill High School
on Nov 30, 2010 at 3:45 pm

Record - I thought I did previously respond to your fireman cancer point. Again, I reference CalPERs actuary information when determining differences between working groups and the general population. According to CalPERs there is no difference between life expectancies between firemen and general employees. You can look this up yourself on google.

While I respect and value what you do, I like to focus on facts regarding what price society should place on the value someone provides. The compensation of public employees, including firemen, is simply unsustainable. If you took an objective look at the numbers, you'd likely come to the same conclusion. Heck, Obama just placed a two-year freeze on federal employee salaries.

Let's outline a likely scenario for a typical fireman. Let's assume they started their career at $75K and retired at 55 after 30 years at $150K. The actuarial reality is that person is expected to live another 27 years. This means they worked for 30 and then get to earn 90% of their final salary for another 27 years. This means they really started out at an equivalent salary of approx. $210K and finished at a salary of $285K.

We as a society can't afford this. Also, keep in mind that firemen pre this explosion of entitlement benefits and early retirement, earned much less and worked under more unsafe conditions due to lack of new technologies/techniques.

Posted by Not So Sure
a resident of Another Pleasanton neighborhood
on Nov 30, 2010 at 7:02 pm

I love you Bart Hughes! Because you deal in facts and numbers.

With respect to numbers, I would like to tell Record that my darling husband of 30+ years is 59 years old, 6'3 and 198 lbs and still plays rigorous sports with 25 years olds (if I say too much, I'll give too much info about him). He can jump ladders and fences and haul heavy equipment with his young sons. They are impressed. And...he didn't have to stay in shape for his job...he was an executive "desk-jockey" who has been (unwillingly) "retired" for 2 years. No pension...he would jump at another job because he is very active and loves to be productive. And...he would physically make a very able firefighter - even at his advanced age.

I also have - had - a firefighter in my family who perished fighting a fire. I do not make light of this. I just know that there is a solution that does not include retirement at 55 with a 200K pension.

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 1, 2010 at 9:03 am

That's interesting. I work with lots of Bay Area/Silicon Valley corporations and it is very rare to see a material number of workers over 55-60. In fact, these organizations are dominated by the 25-45 crowd. Most Silicon Valley types I know target ~55 for retirement and then maybe pick up some part-time consulting, philanthropy, etc. after that. In other words, pretty much the same as the government workers. Just without the stigma.

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 1, 2010 at 9:13 am

At a macro level, let's not forget that there are also a fixed number of jobs available in the economy at any one time. Retiring someone at 55 makes way for someone else to come into the workforce. There's a very real social cost to having unemployed 23-year-old college grads and 40-year-old parents, too.

With apologies to the hard-working older workers on this thread, it is less expensive to employ a 23-year-old firefighter than a 60-year-old firefighter.

Posted by two cents
a resident of Another Pleasanton neighborhood
on Dec 1, 2010 at 10:10 am

Many people here seem to stick with a Silicon Valley vs Public Sector comparison.

There are plenty of us in regular private sector jobs who do not retire under 60, 65 is the norm, and who do not get bonuses or much of a retirement contribution. My husband's company gives 16% of what he contributes to his 401k. Of course it used to be more, but the economy has changed things. Salary has gone down significantly in recent years. I watched that show on TV where a consultant goes in to help unemployed families and it shocked me that even though as a family I thought we were doing OK, we're not taking home much more than the unemployed.

Posted by observation
a resident of Another Pleasanton neighborhood
on Dec 1, 2010 at 11:01 am

I agree with Bart that local government pension policies are unsustainable. I hope that Bart can admit a mistake when he said:

"It has only been with government employees where the retirement age has gone down while life expectancy has gone up. Hence the public employee pension funding crisis."

That is true of state and local government employees, not US civil servants, as has been well documented. When people start making blanket statements like the above without fact checking them, I start to worry. I'm hoping Bart will say that he was speaking only of local "government employees".

Posted by Bart Hughes
a resident of Foothill High School
on Dec 1, 2010 at 11:15 am

Observation - I surely don't want to undermine all the researched facts that I have posted on this blog with an incorrect generalization, so I appologize for that. I incorrectly assumed that since federal employee income grow has outstripped that of the general population these last couple of years, that their benefits increased too.

It would be nice if you could get all the others on this blog who have made mistatements to admit their mistakes. ;-)

Posted by Bart Hughes
a resident of Foothill High School
on Dec 1, 2010 at 11:21 am

b - I can't help myself. I'm going to have a little fun with you here. If I followed your logic from your most recent post, all people who reach 55 should retire to make room for the new employees. Greece tried this for a while and look where it got them ... ;-)

I think you are forgetting that society must bare to the cost of that new employee plus the retirement benefits of that 55 year old at the same time. So assuming the 55 year old is capable, the next cost of that job to society goes up dramatically.

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 1, 2010 at 3:24 pm

I wasn't saying what is right or wrong. Merely observing what seems to be reality.

Is it fair that some tech workers can retire at 40 because they won the stock option lotto, while police officers and park maintainers would be required to pound the pavement until 65 or more? I suppose it depends on your reasons for choosing each of those careers.

It might be fun to cut all the public employees' salaries to $20k/year and eliminate retirement benefits, just to see what happens. Since there are more people who want to work than there are jobs, I suppose there would be no consequence to doing that. I'm sure we could even get Not So Sure's husband back to work.

Posted by Bart Hughes
a resident of Foothill High School
on Dec 1, 2010 at 3:48 pm

All public servants deserve to get paid for the value they are providing to society, so I don't agree that we should cut salaries to $20K and play to the mass of unemployed people to fill those jobs. We as a society do need long-term expertise, quality and stability with the roles that public servants play.

However, we have ended up with a system that overly compensates public employees (I'm referring to pension plans that allow people to retire at near full salaries at relatively young ages). This scheme is putting tremendous financial pressure most government entities. The current approach allowing public employees to retire with million dollar plus packages and is simply not sustainable. This is why we are seeing restructuring of pension plans in many, many places. It seems as though this is an obvious problem to most people except those that are benefiting from the mistake.

Remember pre-1999 we didn't have such generous plans and life went on just fine.

Posted by two cents
a resident of Another Pleasanton neighborhood
on Dec 1, 2010 at 7:51 pm

To b:

If someone in tech wins the "lotto", they are paying for their own retirement. It's not my problem and I don't resent it.

Many private sector workers (especially if you exclude bankers and tech) retire much, much later than the public sector.

The regular private sector workers are the people you should be talking to if you think that current public sector spending is justified. You can think as much as you like that the "rich folks" should pay. But in many minds, the public sector are now the "rich folks". I had to laugh when there was an article talking about how $250k was a very low amount to make a year and the article referenced the income of two public sector workers to illustrate the point.

Most private sector workers have not won the lottery . . . do not get bonuses . . . have had their salaries reduced . . . pay a huge amount towards health insurance . . . do not have anywhere close to enough money to retire at 60 . . . their pension scheme - which they contribute a ton to - is not guaranteed to provide any specific level of income and subject to the whims of the stock market, bankers and the federal reserve (yes, I know to bail out the bankers, but that is another story!).

Is there a reason these "regular" private sector people should pay extra tax for public sector people to retire years earlier with escalating salaries, a guaranteed pension for life that the people involved barely contribute to?

And anyhow, Bart's point is that even if we wanted to, we can't afford to pay this anymore without bankrupting our town / county / state. If you look outside of our Pleasanton bubble, surely you can see that things are crumbling.

Posted by Really?
a resident of Another Pleasanton neighborhood
on Dec 1, 2010 at 9:53 pm

I'm curious where you think that because private sector jobs have crumbled, that everyone must suffer the same fate. I certainly did not hear this reaction when times were good. In fact, I watched as salaries, perks, bonuses, and spending was on the rise for so many people in this town. I don't recall any great equalization at that time. I find it laughable "two cents" to hear you call public sector jobs- the rich people! I'm continuing to contribute to my retirement (although you like to say I don't), I continue to work my second job as I have done for the past 10 years in order to live in this town, and I continue to save what ever I can for times like these.

With all the complaining, maybe you all made the wrong career choice, why aren't you flocking to public sector service jobs? You all remind me of the great fable the Turtle and the Hare.

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 2, 2010 at 11:53 am

OK, so $20k is too low and $130k is too high. What is a reasonable level of income for a very experienced technical professional? Someone managing an organization of 50? Of 500? I'm sure you know people who earn $200k and have very generous retirement plans and other benefits, who have a lot less responsibility than that.

And why is there such a stigma associated with retirement plan contriubutions relative to other compensation and benefits? I pointed out much earlier in this thread that public sector salaries tend to be lower than private industry salaries. Apples-to-apples, that's true. There are A LOT of people who take, and stick with, these thankless lower-paying jobs precisely because of the more generous retirement plans.

Posted by Arnold
a resident of Another Pleasanton neighborhood
on Dec 2, 2010 at 3:32 pm

B

"And why is there such a stigma associated with retirement plan contriubutions relative to other compensation and benefits?"

- Because the pension plans are out of control.

The cost of the safety pension plan was originally set-up so that 25% of the required funding would come from employee & employer contributions, with the other 75% coming from investment returns. The original formula for the pension plan was 9% for the "employee share" and the "employer share" was 16%, with average investment returns of 7.75% making up the other 75%. Over the past decade CalPERS average rate of return was 3.3%, and most plans are only about 60% funded.

To help mitigate the impact of investment losses CalPERS has been increasing the contribution rate using a smoothing policy - a graduated rate increase. Actually, they only increase the employer/taxpayer rate while the employee rate remains unchanged, and in Pleasanton the city pays both the employee & employer contribution. The original 16% of payroll, or the employer contribution rate, has increased to 27.8% of payroll for Fire and 29.1% for police. Now CalPERS is forecasting that the employer contribution rate could increase by 55% or more over the next three years, although it is expected to increase over the next 5 years. For police that would put the employer contribution rate at 45.1% of payroll by July 1, 2013. When you add back the 9% of the employee contribution, because the city pays the employee contribution, then the city's employee/employer contribution grows to 54.1% of payroll. In other words, for every 100K of police payroll the city will send CalPERS 54, 100 dollars, as opposed to the current $29,100. I'm expecting CalPERS to raise Pleasanton's contribution rate by close to 7% this next July 1st.

There is a lot of discussion going about the sustainability of CalPERS expected 7.75% rate of return, or what I call the taxpayer guaranteed rate of return (great if you can get it, I guess). Here is a hypothetical for those interested. If an investment plan were considered fully funded at 1 million dollars, with a guaranteed rate of return of 7.75%, you would expect a return of $77,500 dollars, for a total plan value of $1,077,500, after one year. If you didn't receive the full 7.75% you would expect the guarantor to make the investment whole.

If that same investment plan were only 60% funded, at $600,000 (meaning there is a 400K unfunded liability), what rate of return is required to generate that same 77,500 dollars, keeping in mind that earning 77,500 dollars doesn't do anything to address the unfunded liability? It is only the dollar amount required to keep the unfunded liability from growing. So the question is what rate of return is needed to earn 77,500 dollars on a $600,000 dollar investment, in one year?

The above scenario is a simplistic look at part of a larger, more complex issue. With CalPERS funding at about 60% of its obligations, I'm just trying to illustrate where the pension plans are in relation to the Eight-Ball.

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 2, 2010 at 4:01 pm

Thanks, Arnold. That's all interesting and noteworthy. But you didn't address my fundamental point--this is only one piece of a much larger and more complex puzzle.

And it is a problem that was created by the market losses of a couple years ago, and has been diminishing as the market recovers. Just like the pain in my 401(k).

If the economy weakens, CalPERS will continue to be the problem. If the economy strengthens, CalPERS will be just fine, and the problem will be rising salaries in a stronger employment market.

That's what I'm trying to get you to see--you're narrowly focusing on a small piece of the puzzle, which is largely a 2008 problem that is already working itself out. You should be focusing on the whole puzzle--and what's more likely to happen in 2011-13, not the consequences of what happened in 2008.

Posted by GOTV
a resident of Vineyard Avenue
on Dec 2, 2010 at 6:44 pm

Here's an interesting article on the subject: "Group Touts New Pension Initiative"

"A pension reform organization has released a draft initiative plan for the 2012 ballot that would require public employees to pay half their retirement benefit costs, mandate defined contribution plans for new employees, significantly limit public pension benefits and require public employers to fully fund all pension and retiree medical benefit plans by 2020."

Posted by Bart Hughes
a resident of Foothill High School
on Dec 2, 2010 at 7:57 pm

b - Please be aware that Pleasanton's pension issue started well before the 08/09 downturn. It was a plan with faulty assumptions that was evident starting in the 03/04 timeframe. I'd be happy to share with the the information the city shared with me so that you can see the numbers.

Also keep in mind that CalPERS hasn't yet dealt with the losses that occurred in the 08/09 timeframe. They will over the next couple of years with the very large increase in contribution requirements that Arnold mentioned.

Posted by Arnold
a resident of Another Pleasanton neighborhood
on Dec 2, 2010 at 8:14 pm

b

You said, "Thanks, Arnold. That's all interesting and noteworthy. But you didn't address my fundamental point--this is only one piece of a much larger and more complex puzzle."

When did you make that point? You didn't, at least not in the comments I responded to. When I said, "The above scenario is a simplistic look at part of a larger, more complex issue.", and I was refering to other issues related to the taxpayer unfriendly organization known as CalPERS.

You go on to say, "That's what I'm trying to get you to see--you're narrowly focusing on a small piece of the puzzle, which is largely a 2008 problem that is already working itself out. You should be focusing on the whole puzzle--and what's more likely to happen in 2011-13, not the consequences of what happened in 2008."

Nonsense b, CalPERS issues began long before the market collapse of 2008-2009. The numerous problems of the beleagured pension fund run deep. It was CalPERS own Chief Actuary that called CalPERS pension plan unsustainable. Does that concern you at all? I'm guessing you can rationalize that too. Or maybe you consider "working it out" doubling the cost to the city/taxpayers. You do know that for that to happen while revenue remains flat will require reduced services, increased taxes, or more likely reduced services and increased taxes so a select few can retire at 50 or 55.

You never actually responded to my question, "what rate of return is needed to earn 77,500 dollars on a $600,000 dollar investment, in one year?".

Posted by Stacey
a resident of Amberwood/Wood Meadows
on Dec 2, 2010 at 8:44 pmStacey is a registered user.

b wrote: "There are A LOT of people who take, and stick with, these thankless lower-paying jobs precisely because of the more generous retirement plans."

And that's why the pension spiking for higher-paid employees is so damaging to the future viability of the fund for the retirement of lower-paid employees. It limits society's ability to offer the benefit of retirement income security for the so-called little guys. Pension reform doesn't necessarily mean to do away with the pensions. That's why people around the State are looking at doing something like limiting the level of incomes for pensions and offering defined contribution plans above that limit.

Another aspect not touched upon here is that CALPERS also funds retiree medical. Medical costs are only getting higher. That will eat more of the fund too.

Posted by Arnold
a resident of Another Pleasanton neighborhood
on Dec 2, 2010 at 9:40 pm

GOTV, that was a nice Web Link. Marcia Fritz and the California Foundation for Fiscal Responsibility (CFFR) are true taxpayer advocates regarding ballooning pensions, and they are also responsible for all the legal leg-work in getting California cities to divulge the number of employees that are receiving 100,000 dollar per year pensions. They are also the founders of the CalPERS & CalSTRS "100,000 Dollar Pension Club" website.

Stacey, you certainly get it. In many cities the unfunded healthcare liability is actually more than the unfunded pension liability. The reason for that, as I think you know, is that retiree healthcare liabilities aren't required to be funded in the same manner as pensions. Pay-as-you-go has been the norm. It has only been the last 3-4 years that the GASB has "recommended" that this liability be funded. Some cities started doing that but most have not - because they can't afford to.

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 6, 2010 at 6:18 am

I spent some time digging into CalPERS reports, and I think you guys are getting played here.

CalPERS holds massive amounts of real estate. In the year that just ended, they wrote down the portfolio by 37%, and still managed to pull off a nearly 12% overall return. That was after another large real estate write-down the prior year.

Bear in mind, these are generally high-quality real estate assets, that have simply lost a lot of book value the past couple years, along with everything else. CalPERS has marked down the assets as much as they can (you business types know how squishy and inexact this is) and can now come begging to public agencies for larger contributions.

The bet you're taking here is that there's going to be another substantial drop in asset values that will cause these lower returns to continue. Any further stabilization in the market, and 7% returns will be easy. Actual improvement in the economy from where we are will cause these values and the fund's return to soar.

Meanwhile, they've caused a citizen revolt that will ultimately take the pressure off them to produce any significant investment returns.

Mark my words. You're mocking me now, but you're chasing a horse that left the barn two years ago. This will be a distant memory in another two years, regardless of whether you waste more tax money on another initiative

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 6, 2010 at 10:45 am

Stacey and Arthur, now there's an issue worth exploring. Health insurers have already bankrupted many small businesses. Yes, larger corporations and government agencies are the next to feed their coffers. We desperately need to reform the health insurance industry and expand Medicare-like coverage to all. But that's another conversation.

Posted by b
a resident of Another Pleasanton neighborhood
on Dec 6, 2010 at 11:20 am

Bart, look. The bottom line is that I agree this is an issue worth exploring. The ENTIRE compensation package should be reviewed at least annually, to ensure both affordability and market competitiveness. That's Management 101.

The problem I have here is the way you're threatening to force this "reform" on the city one way or another. I think you're well-intentioned. But we just re-elected our Mayor and two Councilmembers to a new term, and now we need to let them do their jobs.

You've presented a legitimate concern to them, and it sounds like they're taking it seriously, which they should. If they come back and agree with you, something will be changed to ensure short-term affordability of these plans. But they also need to look at the big picture--weighing two years of poor real estate and stock market investment performance (a trend which seems to have reversing favorably), against their ability to recruit and retain high-quality employees who are on decades-long career tracks.

Overall, this initiative (local)/proposition (state) process is badly broken. While generally passed with good intentions, these initiatives/propositions tie the hands of our elected leaders, preventing them from looking at the big picture and fairly weighing tough alternatives.

One Bay Area city is having trouble retaining employees for more than a few years because their pension plan was "reformed" and is no longer competitive--people work there for a few years to gain some experience, then go elsewhere for their careers. Pleasanton citizens with good intentions blocked a local housing development with an initiative, and now the city has no real choice but to spend millions on one lawsuit after another. Our state legislators can't balance the state budget because their hands are tied by so many well-intentioned citizen propositions that tell them what they can and cannot do.

By all means, ensure the Council takes this issue seriously. Thank you for your service to the community and your good intentions. But if they disagree with you and believe your proposal is short-sighted, please stop. Please don't waste more taxpayer money passing an initiative that prevents the City from being able to weigh ALL the short- and long-term needs.

Posted by Shoot_The_Messengers
a resident of Del Prado
on Dec 9, 2010 at 2:17 amShoot_The_Messengers is a registered user.

Hey Record,

So enlighten us as to how much is "enough"? I don't know the details of the pension for Pleasanton/Livermore FD, so why don't you share with us what it is today and where you think it should be to compensate for the increased cancer and 56hr work week. Is 3% at 50 fair? How about 5% at 45? Or perhaps 100% at 1? Where is the point where it is "fair enough"? Just curious as to where you objectively assess this. Thanks.

I think it is important to tell the mayor and council that they are on notice to get something done otherwise the citizens will take it into their own hands to make something happen is important otherwise they will do nothing. They need to act boldly and quickly otherwise put it on the ballot and let's eliminate all of this pension pork.

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